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Packaging Sales Surpass Album Sales, Sony Reports
September 1, 2013

LOS ANGELES--Three short years after its controversial decision to stop selling albums and to focus exclusively on the marketing of licensed packaging, Sony Music reports that revenues from the sale of liner notes and associated packaging exceed those generated by sale of its music catalog. "At the time, the heads of all the Majors thought that we were crazy," explains Sony A & R Chief Herb Iki. "But it was just that they refused to see the way in which the industry was developing. We realized pretty quickly that music, because it's really just bits, was destined to be free; but packaging, that's something we know about, and something we can sell."

Sony launched its "albumless" strategy with the widely publicized release of "Nobitz," the 33rd album from classic-rock stalwarts U2. At the time, fans lining up to purchase the disc were almost universally shocked to discover that "Nobitz" consisted entirely of brightly-colored cardboard and plastic packaging, with a stylish, burlap circle in the place of a disc. "We learned a lot from the 'Nobitz' launch," recalls Iki. "First, we learned that it's better to keep the packaging empty than to try to replace the disc with something. I don't know how many people tried to play that burlap 'disc,' but I think every one of them called to complain that theirs was defective. Second, we learned that, overwhelmingly, fans will pay for the packaging, even when they can download the music for free."

Three years later, Sony Music sales confirm that a business many thought destined for extinction merely needed to be re-thought. "I've raised my estimates on all the major music companies, largely because they've managed to redefine their markets," notes JupiterScan analyst Helva Vexner. "For a while it looked like the labels were in serious trouble. Artists didn't need their distributional networks in order to get product out there. But now, after Sony's success, artists are re-signing in droves to get the licensing revenues from the packaging."

"Historically, artists relied upon labels for distribution and promotion while labels depended upon artists to supply the product" explains OVA super-agent Maxim Maxim. "The labels finally realized that, in the packaging, they were supplying a product worth money in its own right. Every serious fan craves the iconic connection that's possible only through a physical product. I have, systematically, encouraged all of my artists to sign licensing deals."

The viability of Sony's new strategy, however, remains uncertain. New printing technologies, in concert with a peer-to-peer file distribution system known as Packster, threaten the newfound stream of "Paper & Plastic" or "P&P" revenues. Recent improvements in Materials Printers from Compackard have enabled fans to produce, in their homes, packaging nearly identical in quality to that offered by Sony and other traditional record companies. With a Materials Printer, a block of resin "toner," and a file describing the desired packaging, users can make for themselves the products companies like Sony are coming to rely on.

Sony's Iki remains sanguine. "Packster is just another in a series of technologies that have challenged the way we do business. But that's a good thing. It makes us evolve and innovate, forces us to realize value in ways we didn't previously think possible. It's true that we are in the marketing business, not the music business. But that's why we make money. People will buy marketing. They won't always buy music."

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